Credit card computer chips change how you shop

Dipping is replacing swiping.

Banks have issued millions of new credit cards to their customers with a difference: a small rectangular gold-colored electronic chip. With the chip, financial institutions hope to put a dent in credit-card fraud.

But it means consumers will have to do something different in the checkout lane. "It's very different from how we've been using (a credit card) for decades," said Matt Schulz, senior industry analyst at CreditCards.com.

So how do these things work and what it's all about? Let's get to the important details about EMV chips, which is short for Europay, MasterCard and Visa.

Small business squeezed by new card chips

• What's changed? Rather than swipe the card, you dip it into a slot at the bottom of the credit card terminal and leave it while you're completing the transaction. You may need to sign too. "It is different from people who are just used to swiping and putting it back in their wallet," Schulz said. The terminal also has a traditional magnetic strip reader for chipless cards, but if your card has a chip, you'll need to dip, said Doug Johnson, senior vice president of payments and cyber security policy with the American Bankers Association. 
• Sounds slower. It is. When Press on Your Side tried it recently at Target, the steps took a few seconds longer. "I don't think it is going to slow things down all that much because it's not anything that is overly complicated or difficult," Schulz said. But in the near term, lines may swell a little because of the confusion about how the cards work, he added.
• What did you say about security?The chip makes your card hard to counterfeit. "Instead of passing your credit-card information to the merchant, it passes a unique transaction code that's specific to that one purchase and sends that to the merchant," Schulz said. It stops scammers from being able to create a fake card for a buying spree by hacking your credit-card's account number and expiration date. "If some hacker gets a hold of that code in that database and tries to reuse it to purchase something, it's won't work. It's basically like stealing an expired password," Schulz added.
• What happens if someone tries to create a fake card? If they swipe it, they'll get a message to dip, Johnson said. The system will know your account is associated with a card that has a chip, he said.
• Does it protect me with online or telephone transactions? No. With the inability to create counterfeit credit cards, observers fear that criminals will concentrate more on online credit-card fraud. "We recognize that that is going to be the case," Johnson said. The industry is working on technology to combat that as well, he added.
• What about liability for fraud? "These new cards don't impact consumer liability for fraud at all," Schulz said. "If someone uses your card fraudulently to buy a new TV, you're not going to be stuck with that bill regardless of whether you have a chip card or a magnetic stripe card."
• Who has to install these new credit card readers? Every company, from big chains like Target and Home Depot, to mom and pop retailers. Last week,Walgreens said readers are ready at all of its stores. But there's a long way to go. Only about 10 to 25 percent of retailers have installed new terminals that take advantage of the technology, according to CreditCards.com. "Things are moving a little more slowly than people might have liked," Schulz said.  Retailers had an Oct. 1. deadline, set by card issuers, to install new equipment or face liability for any credit-card fraud.
• What if I haven't received my card yet? You will, but you're not alone. The bankers' association says about 200 million cards, out of more than 700 million, have chips. "By the end of the year, we expect that 70 percent of cards will have a chip on them," Johnson said. Eventually, debit cards will have chips too.

Do you have a consumer problem that needs solving? Contact David P. Willis at 732-643-4042, pressonyourside@gannettnj.com or facebook.com/dpwillis732.

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